When people think of assurance engagements, they usually think of external audits. These are services provided by external auditors. With external audits, auditors aim to seek sufficient appropriate audit evidence. Based on this, they can provide an opinion related to whether the subject matter is free from material misstatement. The subject matter, in this case, is the client’s financial statements.
However, there is more to assurance engagement than just external audits. Assurance engagement involves many other types of service as well. Similarly, these may come in two categorizations, including reasonable and limited assurance services. Reasonable assurance engagements include the aforementioned external audits. Limited assurance engagements, on the other hand, primarily consist of review engagements.
What is Attestation Engagement?
Attestation engagement is the process that requires auditors to provide or attestation audits. These are primarily a form of review engagements. However, attestation engagements may also include other areas. There are several types of attestation engagements that auditors may offer. For example, these may consist of reviews, agreed-upon procedure reports, or examinations.
Attestation services, like other assurance engagements, involve gaining assurance over a subject matter. Unlike external audits, the subject matter may or may not include the client’s financial statements. However, they may usually consist of subject matters, such as prospective financial statements, compliance, service organizations, agreed-upon procedures.
What are the Subject Matters in an Attestation Engagement?
There are several types of subject matters that may be a part of attestation engagements. These may include historical or prospective performance or condition. For example, a client’s historical or prospective financial information may be a subject matter. Similarly, backlog data or performance measurements may be a part of it.
Similarly, physical characteristics may also be subject matter for attestation engagements. These may include the area of buildings or facilities, narrative descriptions, physical existence, etc. Furthermore, the subject matter involves historical events. For example, measuring how the market rate of a specific item has changed over time and its causes will form subject matter.
Attestation engagement subject matters also include analyses made by the client. For example, any forecasts or cost analysis performed. Internal control reviews are also an example of attestation service. Overall, examining a client’s systems and processes are a part of attestation services and a subject matter. Compliance audits are also a part of attestation services. These include checking whether the client complies with various regulations.
How Do Attestation Engagements Differ from Other Audits?
Attestation engagements don’t differ significantly from other audits. These services involve a type of audit that provides an opinion. It is similar in that regard to other audits. Usually, the standards required for attestation services are lower. However, as the scope of these audits increases, the standards may also require more.
Regardless of the type of engagement, auditors must maintain their independence. They also need to ensure the quality of the evidence they collect. This evidence must be both sufficient and appropriate. Due to the increase in demand which require to have these types of engagements, the regulations have also increased.
What Are the Assertions in Attestation Engagements?
An assertion represents a declaration about whether the subject matter conforms with selected criteria. Auditors may report on a written assertion or directly on the subject matter. Regardless of which way they choose, it is crucial that they obtain a written assertion in attestation reviews. It may come in the form of narrative descriptions or representation letters.
Auditors must request a management’s assertion from the responsible party for all attestation services. For attestation services, the responsible party includes parties that represent the information provided in the attestation report. Auditors use this information to base their opinions. Therefore, it is also crucial for auditors to ensure that the responsible party knows the provided evidence.
What Are Examples of Attestation Engagements?
Like other engagements, attestation engagements seek to provide assurance. These may include many different types, as mentioned above. Some of the examples of attestation engagements include the following.
Agreed-upon procedures
Agreed-upon procedures are one of the common examples of attestation engagement. In these services, auditors perform audit procedures to ensure the subject matter meets specific criteria. These criteria usually come from the client. However, there are no specific standards that dictate this process. With these services, auditors must report their findings directly to the intended users.
Compliance audits
During compliance audits, auditors seek to determine whether the client meets specific laws, regulations, contracts, etc. It also relates to how the internal controls ensure compliance with those laws and regulations. Compliance examinations seek to present clients with reasonable assurance associated with the client’s compliance and internal controls surrounding them.
Prospective financial statements
Prospective financial statements usually include an assumption or various assumptions. However, these do not present a true picture. There are several uses for these statements. Like financial statements, clients may choose to obtain assurance about these prospective statements. With these services, auditors seek to provide reasonable assurance about the presentation and assumptions made in the financial statements.
Conclusion
There are two types of review engagements that auditors may provide, including attestation engagements. These engagements usually provide limited assurance. There are several subject matters that attestation engagements may examine. Usually, these engagements are not subject to the same standards as other audits.
